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For the Vanguard mutual funds that do not have a redemption fee, is the minimum amount of time during which the minimum investment must be in the fund 60 days as mentioned here, or is there another penalty/implication for redeeming a portion that quickly?

It seems, as long as one is enrolled in electronic delivery, the $20 maintenance fee for having less than $10,000 in the account is waived. The "frequent-trading" term seems subjective, and I'm not sure whether doing it once per fund after the initial 60 days would qualify.

The motivation for this question is to have the ability to invest in multiple funds without having to invest the sum of the minimum investment amounts right away. For example, if one had $18,000 to invest and wanted to do so in two funds with $10,000 minimums, one could invest the $18,000 in one, then redeem $10,000 60 days later to invest in another fund. Would doing so be in bad form?

In that 60-day period, I would expect the tax implications to be minimal, unless the taxes on the difference between the redemption amount and the cost basis exceeds the effect of the expense ratio difference between the fund and lower-minimum or more-diversified funds with higher expense ratios.

  • This question provides some helpful insight. – BaronFiner Jul 21 '17 at 0:38
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    It seems you are asking a question somewhat askew from what you really want to know. If the question is "can I circumvent fund minimums by reducing my holding below the minimum later", the answer is no, as your answer notes. The frequent trading fees don't really matter since the entire concept of reducing your holding below the minimum won't work. – BrenBarn Jul 21 '17 at 3:07
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According to this, the minimum needs to be maintained by the balance, otherwise the shares are downgraded in a tax-implication-free manner.

You must meet—and maintain**—a minimum investment of:

  • $10,000 for most index funds and tax-managed funds.
  • $50,000 for most actively managed funds.
  • $100,000 for certain sector-specific index funds.

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